National apartment market slows as developers eye the luxury market

As has been the case for the past year, two-bedroom, two-bathroom apartments once again take centre stage as the most popular selling product, accounting for 50% of total sales. If we glance back to the June quarter in 2017, this product type only accounted for 39% of sales, while one-bedroom apartments with and without a car space were a close second with 36%. Today, we can see that the preference for larger apartments is accelerating, with 66% of future supply intended for 2 and 3-bedroom products, aimed at the owner occupier market.

Urbis National Director Clinton Ostwald said, “We have seen a preference for owner occupier sales across all markets monitored by Urbis’ Apartment Essentials monitors. This could be driving the increase in larger apartment product.

“Moreover, with continued pressure on foreign investors sourcing finance, developers are starting to move away from investor stock, and are tapping into the local market, with first home buyers emerging from the woodwork.”

Sales have been decreasing at a steady rate of approximately 10% per quarter in 2018, treading at 1,100 in the June quarter. However, The Gold Coast and Melbourne have not resonated with the national trend, recording steady sales into Q2. The average sales price in these cities has also increased for new apartments, showing a positive upward curve. Perth was the only city which registered a downturn in the average sales price, recording $625,000 in Q2, down from $681,000 in Q1.

Mr Ostwald said, “The overall residential market is softening, with a slowing in auction clearance rates for established stock. The market for new apartments is matching this trend in most cities with a slow down in sales rates. 

“However, with continued strong population growth and the likelihood of a steep slowdown in new supply over the next 18 to 24 months, we should start to see sale numbers and price growth start to tick up.”

Owner occupiers accounted for the majority of buyers across all states except Sydney where local NSW investors nabbed 44% of sales. Interstate investors continue to buy into the Gold Coast while foreign investors look to both Sydney (22% of sales) and Brisbane (33% of sales) for new apartments.

Looking at the national picture, 35 projects yielding 4,650 apartments are expected to launch next quarter with a further 9,750 queued for later release. With large scale, high profile developments such as One Circular Quay in Sydney, Brisbane’s Sierra Nuovo and Sky Garden in Melbourne, we may be seeing a new peak in the average sale price as premium apartments hit the market.

The Gold Coast apartment market continued to perform with close to 1,500 apartments launching in the quarter, accounting for 28% of the launches during the survey period. Melbourne was the overall frontrunner with 1,929 new apartments released to the market across 16 developments, securing 38% of newly launched products in the quarter nationally. The other cities experienced fewer product launches with modest apartment releases in Brisbane and Perth while Sydney came in close third with 1,153 apartments launched in the quarter.

Within the Urbis survey, Melbourne, Perth and the Gold Coast were the ones to watch for apartment sales, with Perth recording close to 350 sales, Melbourne, 309 and the Gold Coast, 276. The Gold Coast recorded the highest number of surveyed sales despite being the smallest market with only 7,333 units in the future pipeline.

1,106 sales were recorded in the June 2018 quarter across 28% of the national market:

• Sydney (44 sales, 13% of market surveyed, market size 50,247 units)
• Melbourne (309 sales, 18% of market surveyed, market size 57,749 units)
• Brisbane (130 sales, 42% of market surveyed, market size 16,897 units)
• Perth (347 sales, 86% of market surveyed, market size 11,219 units)
• Gold Coast (276 sales, 70% of market surveyed, market size 7,330 units)

Weighted average sale price recorded at $713,104.

• Sydney – $1,146,591
• Melbourne – $678,572
• Brisbane – $766,929
• Perth – $625,072
• Gold Coast – $768,569

The most popular product type was two-bedroom, two-bathroom product at 50% of total sales. Across the cities the highest selling product types were:

• Sydney – Two-bedroom, two-bathroom apartments – 45%.
• Melbourne – Two-bedroom, two-bathroom apartments – 43%.
• Brisbane – Two-bedroom, two-bathroom 47%
• Perth – Two-bedroom, two-bathroom – 45%
• Gold Coast – Two-bedroom, two-bathroom – 67%

27% of actively selling apartments are in presales, 51% are under construction and 22% are recently built.

New project launches in the quarter:

• Sydney – 5 projects, 1,153 apartments
• Melbourne – 16 projects, 1,929 apartments
• Brisbane – 2 projects, 276 apartments
• Perth – 4 projects, 259 apartments
• Gold Coast – 11 projects, 1,429 apartments

Want an overview of what occurred in the national new apartment market for Q2 2018? Look no further. In this video, National Director of Property Economics Clinton Ostwald provides an outline for New South Wales, Victorian, Queensland and Western Australian markets.  

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